Published: 17th April 2012

The FSA has published ‘Finalised guidance’ on financial promotions.

‘Financial Promotions , Fund Performance and Image Advertising’ is probably self-explanatory from its title.

For most investment firms, the performance rules (COBS 4.6) will only be relevant where the recipient is likely to be a retail client. Having said that, the ‘fair, clear and not misleading’ requirements of COBS 4.2 will apply with respect to all clients regardless of categorisation (on the basis that COBS 4 applies to both ‘communications’ and to ‘financial promotions’). As such, and bearing in mind the FSA’s views on unregulated collective investment schemes (see article ‘Conduct Risk Outlook 2012’), firms without retail clients may wish to use the performance rules as a guide in order to demonstrate compliance with the spirit of COBS 4.2. Note that COBS 4.6.2, ‘past performance’, requires the use of complete 12-month periods. Therefore if figures are only available for a shorter period, say a recently established fund, then actual past performance cannot be shown at all (see also Note 2 in the table in COBS 4.6.4A).

We are reminded that the FSA does not pre-vet or approve promotions. As such, even though non-compliant promotions are in circulation this does not exonerate other firms from seeking to comply (any firm (or consumer) spotting an unfair, unclear or misleading advert can bring it to the FSA’s attention – see link).

Image advertising is exempt from most of the COBS 4 rules – but firms need to ensure that they are clear on what does, and does not, constitute ‘image advertising’: please see the guidance for further information.

‘Financial Promotions – Advertising ISAs & Adverts for Investment Professionals’ will be of interest even to firms that have no involvement with ISAs.

The FSA has seen a number of adverts for fund managers etc. stating that they are for ‘investment professionals’ but it’s not always clear that this is the case. We are reminded that whilst ‘investment professional’ may appear in the Handbook Glossary (which is not the same as ‘professional client’ in COBS 3.5), it is a term that is normally associated with the Financial Promotion Order (which is usually relevant for unauthorised firms) or the Promotion of Collective Schemes (Exemptions) Order (which is relevant for unregulated collective investment schemes). The message from the FSA is to be clear about who the investment is aimed at and provides suggestions such as stating that a promotion is not for retail clients.

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